ASIC Enforcement Review – Part 2

Plans to increase ASICs search warrant powers

The ASIC Enforcement Review Taskforce’s second position and consultation paper signals changes aimed largely at increasing the regulator’s search warrant powers and reducing some existing inefficiencies in the process.

The main proposals include:

Consolidating ASIC-specific search warrant powers from various Acts into the one ASIC Act

Currently, ASIC has search warrant powers under the ASIC Act, Corporations Act, NCCP Act, SIS Act and RSA Act, but there are inconsistencies between legislation. Consolidating these powers under the one act should provide more certainty and transparency around the regulator’s powers. This proposal also involves removing provisions which impose “forewarning” requirements.

ASIC Act search warrants to provide for search and seizure of “evidential material”

Currently, ASIC is restricted by having to specify “particular books” which can be seized under the warrant in advance of conducting a search. This proposal is controversial because it increases ASICs ability to search and seize a broader “kind of evidential material specified in the warrant” where there are reasonable grounds for suspecting that there is evidential material.

However, it is proposed these ASIC-specific powers only apply where ASIC Act search warrants are issued due to reasonable suspicion of a contravention of an indictable offence. This attempts to provide some balance between ASIC’s effective legislative tools, and the relevant harm or risk to individual rights. “Reasonable suspicion” will only apply to indictable offences – in practice, this means any suspicions around offences punishable by imprisonment for 12 months or less (or a contravention actionable only in a civil or administrative context) would not provide basis to issue a search warrant.

Another way in which ASIC proposes to increase its search warrant powers is by including ancillary powers that mirror the Crimes Act provisions. These ancillary powers include the ability to apply for search warrants by electronic means, the use of electronic equipment, and copying data from electronic equipment – these require the occupier to provide reasonable assistance during the execution of a search warrant.

A most controversial proposal is making material seized under ASIC Act search warrants available for use in criminal, civil and administrative proceedings. ASIC cannot currently utilise Crimes Act warrants in cases where it would otherwise be desirable, and hampers cooperation with other agencies. The paper provides the following example: consider an investigation by the AFP into foreign bribery of company employees. If the AFP sought to refer potential civil liability contraventions of directors’ duties, evidence could not be used by ASIC in civil proceedings.

The Taskforce acknowledged concern that material seized under a search warrant could be then used in a proceeding not contemplated at the time the warrant was issued. They provide the example where material seized in an investigation of Company P identifies misconduct by a number of financial advisers employed by company P and is used to take administrative banning action against those advisers.

In line with this proposal is a suggested increase in ASIC’s ability to retain seized material – currently under the Competition and Consumer Act the regulator has 120 days to return seized material; it’s proposed to increase this period to 12 months, as prosecutions do not usually commence within a 120-day time frame.

Finally, it’s proposed that use of material seized under search warrants by private litigants should be subject to appropriate limits. Currently, in some circumstances, material seized under a search warrant may be or may be required to be, released by ASIC to third parties for the purposes of separate legal proceedings. The paper does not specify what limits will apply.

Part three of the ASIC Enforcement Review will consider proposals which increase ASIC’s licensing powers.